Automotive Business Manager - SAE Roundtable Series

SAE Roundtable Series

A View from an Automotive Business Manager: A Varied Global Landscape

Interview conducted in May 2020

 

Meet G., a senior executive for a global automotive Tier 1 supplier headquartered in Europe. G. has extensive international experience, and G.’s company has customers and partnerships throughout Asia, Europe and the Americas. G.’s focus is understanding those markets and customers and helping the company plan for and adapt to a constantly evolving competitive environment.

 

SAE: Think back to New Year's Day 2020, a little less than six months ago. A new decade and year are in front of us. We have heard of a certain virus localized in China but have no idea what its impact might be. What are your goals two, three, five years out?

G.: At that time, and to an extent still, the automotive industry was characterized as being under fundamental and transformational change. A lot of it is technological but also some is behavioral. We had already stopped doing linear forecasts and planning for incremental change two or three years ago in order to prepare for that transformation and define our role in it. Nobody's seeing a dominant mobility technology or definite direction yet, but instead there many opportunities and ways things could evolve. So, flexibility and agility were all important and top of mind.

Nevertheless, already there were some signals of a downturn. We've seen China two years in a row slow in sales, reduction in the U.S. and stagnation in Europe. It wasn't all nice and dandy, and right in the middle of a transformation that costs a lot of money.

 

SAE: And now we are at the end of May 2020, and the world has arguably changed completely. What are the top three challenges that you or company encounter?

G.: The top challenge for industry right now is knowing when your customers are coming back, when they will start buying again. And that depends on when the end consumers will start consuming again, actually going into the dealership and buying cars, buying mobility. The immediate impact of lost sales is tremendous.

In the face of this is a fight for individual survival or at least business assurance. How do we deal with the impact of non-sales? How do we get going again? How do we ensure a supply chain? How do we stay afloat, get cash? It's very much a fight with everybody on his own. Every city is doing that, every county is doing that, every country is doing that, every company is doing that. And casualties are already visible.

This industry is not a me, myself and I industry. It has not been, and it won't be, especially if you look at the transformation that is still ongoing. It is a very networked industry, and it's a global industry. It's a bit tough to see how we're going to get out of the consumer challenge and also the challenge of everybody fighting on his own behalf. In the end we will only succeed if everybody pulls in one direction. That may be a few months out, but for me it is already top of mind.

 

SAE: Because of the COVID-19 crisis, is there anything that you are required to be an expert in now, that you weren't required to be an expert in before? Any new expertise and skills to develop?

G.: Yes, a lot. Strategy looks different today than it did two months ago, and New Year's Day 2020 already looked different than three years ago. There is no just going forward and extending what you have been doing. It's all based on innovation, agility, being successful and playing many plays. If you had focused on one play before, then you probably didn't make it.

Strategy to a certain extent is how do I assure the business first, right? Some companies had it easier in that they just send everybody home and say come back in six weeks. We don't have that. We still had a big order book and had to deliver on it. We couldn't just close down. We had little groups of ten to twenty making up 11,000 people, all on a different level of activity. You have to make sure that they are all utilized, they're still effective. Five thousand people over a weekend were sent home to work out their home office, and not stop working. This is nothing we had done before.

Then digitalizing all of our world, that’s all new. That goes for ensuring motivation, maintaining leadership. Sometimes that means effectively just scrubbing what you have done before so everything just needs to work differently. There are many things that we all have had to learn and we all have to experience in a different way.

 

SAE: With all these challenges and adaptations required, was it necessary to switch from long-term strategy to short-term tactics?

G.: In essence, no. There is immediate fear driving a mentality that “cash is king,” but at the end of the day, nobody's going to save his way to glory here. If you come out of this and don't have innovation, if you're not better at something than others, you may have lower costs, but so what?

I think the complexity now is to be very mindful of how to do shorter business (not wasting money, etc.) while doing so smartly to come out of this crisis with innovations and even a better product portfolio. The most difficult part of this is that some of the growth areas, some of the most strategic areas, are the most volatile. Look at our industry data. It's very, very volatile.

 

SAE: What other conditions are you observing on a global scale?

G.: Promisingly, our pipeline is growing. Particularly, our pipeline in Asia, which entered and came out of COVID earlier, is growing by a ton. Even the European pipeline during the worst months has grown steadily. But this is pipeline, not orders. The pipeline is interest. It is companies asking, “Can you make me a proposal?” But they are not ordering; they are not committing.

That said, some orders never stopped: Korea and Japan for example. And we do see China just starting now to come back with its first orders, and not small ones. So, they're in business again and want to capture a lead advantage of time. Europe is very patchy still but perhaps just behind Asia. The U.S. has nothing to see at the moment, very flat. What I would say is that you can take any country over two-and-a-half months and say, "This was China." Put Korea, then Japan and then put in Europe. And then comes the U.S. We're just in that window for the U.S. now, so I don't think it's a different effect; it's just time lag.

 

SAE: With the stock markets rising and reopening in Germany, elsewhere in Europe and the U.S., are you as concerned now as you were six weeks ago?

G.: We are relieved that we’re reopening again, but it takes some getting used to go to the office again. For eight weeks you were driving through ghost cities. I think Q4 of this year, maybe even sooner, and Q1 of 2021 could be tough, because unless the consumers come back, and quickly, there's going to be a lot of restructuring, reductions and a lot of insourcing at the car makers as they run for cash preservation. But we haven't seen restructuring plans yet, so I think it's not doomsday. If consumers come back quickly, it is only two months lost, and that’s not a problem we can’t survive. Still, some things, some investments will have to go, just out of simple affordability. And they're going to be painful for some companies and people.

 

SAE: What do you think SAE can do, even if it needs to adapt, to help with a situation like this?

G.: I think there is a big need for factual information and analysis from a scientific approach to aid decision-making. It can seem like a disadvantage politically during these times to talk scientifically rather than have blunt easy responses and opinions. SAE has a respected voice in that regard.

For example, we're seeing a lot of behavioral changes from young people. Previously they were hesitant about individual mobility, specifically owning and driving cars, and that's all of a sudden changed again because of the pandemic. We were all observing this trend for the last twenty years, and then it’s out the door within a matter of months. This mobility question seems to be more volatile than we thought, and that warrants a lot more engagement and thinking.

I would think that SAE, from its scientific and technical understanding can clarify sustainable trends from short-term shifts and differentiate perceived trends from actual behaviors, because you can ask people what they want and they will tell you one thing, and six months later they will do something very different. In this world where so much is happening around us it can seem like we’re navigating in the fog. Talking is good. Exchanging is good. SAE is a platform for companies to exchange. I think that's an important role. And it’s a neutral platform, not political.

 

SAE: What is your biggest takeaway from all this?

G.: In 2008, we were all wondering, "Is this real? Are the fundamentals changed just because a bank went under?” And the same question applies today. Okay, so there was a health crisis, and for two months we had to shut down. Can’t the world take that? In some ways, we’re thinking about fundamentals again and whether the fundamentals should be very different. And the second one is how can we build in a safety margin so that this doesn't happen again?


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